Episode #136: Free-Rider Friday - March 2017

Ron’s Topics

“European country imposes ‘social parasite’ tax on the poor,” March 27, 2017, New York Post (originally published in News.com.au).

Belarus, country of 9.5 million, lies between Russia and Poland, has implemented a “social parasite tax on the chronically unemployed (also known as the “spongers” or “freeloaders” tax).

It’s $233 (a month’s average wage in the country), for those “work shy” for longer than six months.

President Alexander Lukashenko issued Presidential Decree number 3, in 2015. Failure to pay could ultimately lead to imprisonment, redolent of the old USSR’s concept of “social parasitism.”

After protests, the president agreed to delay the tax, but not eliminate it. It’s estimated that one million are out of work in the country.

This story reminded me of a Harvard Lampoon story from the 1970s about how unfair the tax system is to the rich, since they cannot deduct their Rolls Royce’s and private jets, but the poor can deduct all the kids they have.

The difference is, this story on Belarus is real.

Counsel of protection: the future of insurance,” The Economist, March 11, 2017

the insurance industry is estimated to be $4.6 trillion worldwide.

New York startup Lemonade is a homeowners and renters insurance company, with an app that makes insurance claims easier, and appeals to the digital generation.

It sold 2,000 policies in the first 100 days, 80% to first-time buyers. It uses AI and machine learning to process claims and underwrite policies.

It further rewards under-claiming, giving a share of the savings to your choice of charity (25% Americans defraud insurance companies).

On policy holder used the app to file a claim for a stolen coat, answered a few questions, and in three seconds the claim was paid.

Two Sigma, a large “quant” hedge fund, is also betting number crunching algorithms can gauge risk and set prices better than humans.

Simplesurance, a German firm, has integrated product-warranty insurance into e-commerce sites.

New kinds of risk-prevention services are being implemented thanks to the Internet of Things, such as sensors on incoming water pipes that can detect minuscule leaks, and prevent larger claims for flood damage.

Insurance companies are enticing policyholders with cutting premiums rather than making money from these additional services.

Volvo and Mercedes have announced they are so confident in their self-driving cars, they will not buy insurance at all!

The wonder drug,” The Economist, March 4, 2017

Digitising the health care industry--$18B of capital has been invested in USA digital startup funding between 2015-2018.

Three groups are fighting over the “heath care value chain”:

  1. Traditional innovators—pharma, hospitals, medical tech companies
  2. Incumbent players—health insurers, big pharma buyers, UK’s NHS
  3. Tech insurgents—Google, Amazon, Apple, creating apps, predictive diagnostics systems, and new devices

Buyers increasingly demand “value-based” reimbursement: If the drug and device doesn’t function, it will not be bought. One analyst says if pharma firms don’t put the patient, rather than drug sales, at the center of strategy, they risk losing relevance.

Also, the point of care will move rapidly into the home where heart condition can be monitored, concussions diagnosed and perhaps even predict the onset of Alzheimer’s, Parkinson’s, menopause, etc.

London-based startup Babylon can schedule an online Dr. appoint for $24, and estimates that 85% of consultations don’t need to be in person.

But government could slow down the diffusion of this technology, as this article makes clear: “Cronyism thwarts telemedicine and other innovations,” by Veronique de Rugy.

High-resolution camera phones are good for diagnosing moles, rash, and even eye exams.

However the California State Board of Optometry launched, with taxpayer money, a PR campaign against one such startup.

Indiana passed a law last year that prevents online eye exams, as did Georgia and South Carolina, while VA is about to do the same.

Also, State Boards in various states prohibit doctors in another state offering telemedicine to its residents.

A Brief History of Blockchain,” Vinay Gupta, Harvard Business Review, February 28, 2017

In just 10 years:

  1. Bitcoin
  2. Blockchain (could be separated)
  3. Smart contract, ethereum
  4. New innovation: “proof of stake” rather than “proof of work” (group with largest total computing power makes decisions).
  5. Blockchain scaling: now every computer processes every transaction, which is slow. New: figure how many computers are necessary to validate each transaction, divide work efficiently: speed can go head-to-head with VISA, and SWIFT in terms of processing payments.

Dubai’s blockchain strategy: issue all government documents on blockchain by 2020, which was designed by Vinay Gupta, the author of this post.

Furry profitable,” The Economist, February 4, 2017

VCA, animal hospital chain has a 42,000-square-foot clinic in Hollywood.

VCA was purchased in January by Mars for $9.1B. Mars is second only to Nestle in pet food, and has been getting stiff competition from Amazon, so they are turning towards animal health.

In the USA, spending in pet clinics was $13.7 billion in 2012, and $16 billion in 2016.

VCA will own 1,900 veterinary clinics in America and Canada, four times as many as National Veterinary Associates, its nearest competitor.

The average vet used to be a generalist, but today there are over 40 specialties.

Technically, in many states, it is illegal for corporations to own veterinary practices, but there are ways to structure ownership to get around this.

And since pets count as property, malpractice risk is not very large.

Ed’s Topics

  1. Ad Agency in UK drops Google - How responsible is Google for links that are associated with other searches?
  2. The Guardian, 3/28, Robots vs. Human Experts, by Richard and Daniel Susskind - The Susskinds reflect on the reaction to their book over a year and half after its publication. (Listen to Daniel Susskind's appearance on our show.)
  3. Japan Times, China’s toilet paper thieves - High tech solution to a low tech problem.
  4. US Obamacare, Congress fails to repeal - The GOP had seven years to think about this and they dropped the ball on the goal line. 
  5. NY Times story stating 39% of colleges have reported declines in international student applications. They attributed this to Trump's election. Tyler Cowan analyzed the story on his blog - One real blooper I cannot let pass
  6. Live action Beauty and the Beast, Dan Sanchez, FEE article, Belle's Tax-funded Fairy Tale. Fun, true, and why libertarians ruin everything. 

BONUS article: How Beauty & the Beast is an example of anarchy done right. 


Ed Kless

Ed Kless joined Sage in July of 2003 and is currently the senior director of partner development and strategy. He develops and delivers curriculum for Sage business partners on the art and practice of small business consulting. Courses include: Sage Consulting Academy, Business Strategy and Customer Experience Workshops. Ed is the author of The Soul of Enterprise: Dialogues on Business in the Knowledge Economy, a compendium of a few of the episodes of his VoiceAmerica talk-show The Soul of Enterprise: Business in the Knowledge Economy with Ron Baker, founder of the VeraSage Institute where Ed is also a senior fellow.